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How does power distance belief impact consumers’ responses to demotion in hierarchical loyalty programs? The dual processes of monetary and psychological losses

How does power distance belief impact consumers’ responses to demotion in hierarchical loyalty... Across five studies, we find that high-power distance belief (PDB) consumers (i.e., consumers who value social hierarchy) tend to show lower loyalty after being demoted in loyalty programs than low-PDB consumers (i.e., consumers who value equality). This occurs because while low-PDB consumers are only sensitive to the monetary losses associated with the demotion, high-PDB consumers are sensitive to both the monetary and psychological losses. More importantly, we find that when consumers receive the appropriate monetary (for low-PDB) or status-symbolic (for high-PDB) compensation, the negative effect of demotion is attenuated. Additionally, we find that proactive approaches are more effective in mitigating negative responses to demotion; accordingly, marketers should warn consumers of a prospective demotion and offer consumers help in maintaining their existing membership tier. Doing so results in a win-win situation where consumers avoid demotion and marketers achieve higher profits. The theoretical and practical implications of the research are also discussed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of the Academy of Marketing Science Springer Journals

How does power distance belief impact consumers’ responses to demotion in hierarchical loyalty programs? The dual processes of monetary and psychological losses

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References (62)

Publisher
Springer Journals
Copyright
Copyright © Academy of Marketing Science 2021
ISSN
0092-0703
eISSN
1552-7824
DOI
10.1007/s11747-021-00825-8
Publisher site
See Article on Publisher Site

Abstract

Across five studies, we find that high-power distance belief (PDB) consumers (i.e., consumers who value social hierarchy) tend to show lower loyalty after being demoted in loyalty programs than low-PDB consumers (i.e., consumers who value equality). This occurs because while low-PDB consumers are only sensitive to the monetary losses associated with the demotion, high-PDB consumers are sensitive to both the monetary and psychological losses. More importantly, we find that when consumers receive the appropriate monetary (for low-PDB) or status-symbolic (for high-PDB) compensation, the negative effect of demotion is attenuated. Additionally, we find that proactive approaches are more effective in mitigating negative responses to demotion; accordingly, marketers should warn consumers of a prospective demotion and offer consumers help in maintaining their existing membership tier. Doing so results in a win-win situation where consumers avoid demotion and marketers achieve higher profits. The theoretical and practical implications of the research are also discussed.

Journal

Journal of the Academy of Marketing ScienceSpringer Journals

Published: Jul 1, 2022

Keywords: Customer demotion; Power distance belief; Self-threat; Loyalty;  Monetary and psychological losses

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